• Home
  • About
  • Subscribe
  • Conference
  • Events Calendar
  • Webcast151
  • MOTB
  • Log In
  • Register

Room 151

  • Treasury
  • Technical
  • Funding
  • Resources
  • LGPS
  • Development
  • 151 News
  • Blogs
    • David Green
    • Agent 151
    • Dan Bates
    • Richard Harbord
    • Stephen Sheen
    • James Bevan
    • Steve Bishop
    • Cllr John Clancy
    • David Crum
    • Graham Liddell
    • Ian O’Donnell
    • Jackie Shute
  • Interviews

Community investment bond ‘builds engagement’ with residents

0
  • by Guest
  • in Blogs · Funding · Treasury
  • — 6 May, 2020
West Berks Climate Conference 2019

West Berkshire Council has become the first local authority to innovate using a community municipal bond. Joseph Holmes describes the reason why and the work that lay behind the launch.

Like many other Councils, West Berkshire declared a climate emergency in the summer of 2019.

Only a couple of months before, the University of Leeds released a report Financing for Society setting out some of the options for the public sector in raising finance and, in particular, the concept of a community municipal bond (CMB).

We’d been progressing our work on an overarching environment strategy since last summer, and following a very successful climate conference in October 2019 where there was a strong theme of residents wanting to take action, we’ve been considering CMBs as an option to raise funds.

The scheme itself has been worked up through an internal group with representatives from across the council, including legal, procurement, finance and environment colleagues, which has been vital in getting us up and running on a really tight timeframe.

It is being provided in partnership with the online crowdfunding platform Abundance Investment, which is regulated by the Financial Conduct Authority.

Principles

We are focussing as a resources directorate on being collaborative, creative and communicative, and this fits exactly within this framework. We’ve had external advice on accounting and audit review as well as legal due diligence, for which we received £20k to support and undertake via Abundance and the EU Horizon 2020 funded SocialRes scheme. This will also enable a post implementation review provided externally by Trinity College, Dublin.

As fellow s151 officers know, the rates on offer from the PWLB are prone to change; it was only a few weeks before we took the first concept paper of a CMB to our executive last autumn that the government suddenly increased our borrowing rates by 100 base points. This only helped the business case for the CMB as a way of borrowing that aims to achieve three things:

  • Beats PWLB rates;
  • Enhances our engagement with residents;
  • Gives much more control to the Council over borrowing rates.

The first principle is that the CMB must beat the prevailing PWLB rate (we currently borrow on an annuity basis and the CMB is likely to mirror this).

This is a fundamental principle—if we issue at a rate higher than PWLB on the day then we are in effect subsidising those investors in the scheme from local residents and that cannot occur.

As rates are inflated at the moment following HM Treasury’s decision in the autumn, this allows scope for a competitive rate for the low risk to investors, for a state backed bond over five years.

Clearly, if the PWLB rate shifts then the bond will need to take account of this. As part of its due diligence Abundance undertook some focus groups which highlighted that potential investors were very motivated by the ability to have a social impact rather than necessarily a financial return.

The second advantage of the CMB is the ability to build stronger engagement with our residents.

The council has completed a lot of work on its environment strategy and for residents to have a direct ability to invest in their local area is really positive. It enables much more of a two-way relationship between the council and investors so we can highlight the environmental value of the investment, as well as future schemes as potential areas to invest in.

Finally, and as the CFO, this point is very important, it provides more control over borrowing rates.

Advantages

The CMB rates will, of course, fluctuate and need to be at or below the PWLB prevailing rate; however, it provides much greater certainty than the PWLB over the risk of a sudden, unexpected change to the rate—for long term schemes that is particularly important.

Of course, if the PWLB rate suddenly goes down, there is an upside for the council by the CMB having to drop too. We can also just go straight to the PWLB, but the upside risk is much more controlled and less at risk of future government decisions on the borrowing rate.

The CMB also means that the council is less reliant on central government funds; from a localist point of view, this will enable us, if we continue beyond the pilot, to be much more focussed on raising funds ourselves rather than through central government.

With the advent of the Municipal Bonds Agency also launching successful bonds recently, it will also enable more diversity in the market which can only be a good thing for councils.

We’re really excited to be the first council to approve this scheme; we may have to wait a short while until the schemes are ready as part of the Covid-19 pandemic for us to launch the bond, but hope that this represents an innovative and new way of us financing core schemes.

The pilot, administered by Abundance, involves a number of other Councils and it will be really interesting to see the schemes they use, and the level of uptake.

For our residents, we expect this will mean an exciting opportunity to invest and savings on our cost of borrowing for the wider taxpayer.

Joseph Holmes is executive director (resources) at West Berkshire Council.

Share

You may also like...

  • Are markets rational? Are markets rational? 10 Sep, 2012
  • Settlement fallout part 2: yet more pessimism required Settlement fallout part 2: yet more pessimism required 17 Jan, 2013
  • Quartet of councils lined up for Municipal Bond Agency’s first issue Quartet of councils lined up for Municipal Bond Agency’s first issue 8 Mar, 2018
  • A court ruling and government intervention in the investment of LGPS assets A court ruling and government intervention in the investment of LGPS assets 18 Jul, 2018

Leave a Reply Cancel reply

You must be logged in to post a comment.

  • Register to become a Room151 user

  • Latest tweets

    Room151 16 hours ago

    Will new public procurement rules offer the best commercial results?: The government has issued a green paper on reforming procurement rules. Helen Randall and Rebecca Rees examine the proposals and argue they may not go far enough. The Cabinet… dlvr.it/Rqtw6T pic.twitter.com/9GiVTkL08U

    Room151 6 days ago

    The vaccine may help settle cash flows but inflation remains a risk: Sponsored article: Lauren Sewell examines the prospects for long-term borrowing as Brexit settles and vaccines are deployed against Covid-19. On the 9th October 2019 Whitehall sent… dlvr.it/RqZXCr pic.twitter.com/PzgOZOGQ0k

    Room151 6 days ago

    ESG in liquidity: Sponsored article: Gavin Haywood looks at the integration of ESG in Federated Hermes’ money market funds. Federated Hermes has over 300 public sector clients invested in our AAA rated money[...] dlvr.it/RqZX5f pic.twitter.com/E87sBXsay8

    Room151 7 days ago

    New realities of investing cash and liquidity: “What to do now?”: Sponsored article: Brian Buck looks at the “unique challenge” for cash management strategies. As investors assess the ongoing impact of the pandemic on their business, levels of cash and… dlvr.it/RqVbk9 pic.twitter.com/ZElVASmEUV

    Room151 7 days ago

    Extra finance promised by the government receives a broad welcome: Sponsored article: The financial pressures facing local authorities this year continue to pose challenges for council treasurers. While the launch of the UK’s Covid-19 vaccination… dlvr.it/RqTzTF pic.twitter.com/HCjH0pyHR5

    Room151 7 days ago

    A savvy approach to managing your cash: Sponsored article: Caroline Hedges examines the need for active cash management to achieve a higher than average return. Last year saw the already mountainous pile of negative-yielding debt around the[...] dlvr.it/RqTzMK pic.twitter.com/uP0RQYTJLt

    Room151 1 week ago

    Putting alternatives at the heart of multi-asset portfolios: Sponsored article: Nick Edwardson looks at the assets that provide the “most attractive opportunities”. We believe that asset allocation is the primary driver of investment returns and that the… dlvr.it/RqQ2Qt pic.twitter.com/WLBzvRRRUQ

    Room151 1 week ago

    Thriving in the pandemic: Avoiding the stragglers: Sponsored article: George Crowdy looks at the sectors providing opportunities for sustainable investment. Throughout much of 2020, we talked about why sustainable investing has thrived in the pandemic,… dlvr.it/RqQ2NQ pic.twitter.com/dxiPWKFsPl

    Room151 1 week ago

    The development of CCLA’s mental health benchmark: Sponsored article: Amy Browne examines the importance of investing in mental health in the workplace. We are living through a public health emergency in more ways than one. Physical health[...] dlvr.it/RqQ2Jx pic.twitter.com/o6yRSCX3oF

    Room151 1 week ago

    Brexit: What the EU trade deal means for the UK economy: Sponsored article: Hetal Mehta looks at the impact of Brexit on economic prospects. Four and a half years after voting to leave the EU, on Christmas Eve the UK finally[...] dlvr.it/RqLBDt pic.twitter.com/No62srfE8h

    Room151 1 week ago

    Cash dethroned: The quest for liquid yield: Sponsored article: Peter Hunt and George Carne ask how treasury departments can balance the need for yield and liquidity. The massive stimulus and waves of liquidity provided by central banks[...] dlvr.it/RqLBDj pic.twitter.com/05g6Zhu1kU

    Room151 1 week ago

    Richard Harbord: Delayed “capital determinations” make section 25 opinions a new crunch point: The severe pressure on local government budgets now means section 151 officers confront a tricky call on  whether they can make a judgement on the robustness… dlvr.it/RqLBDV pic.twitter.com/vTAbDKFzkI

    Room151 1 month ago

    PWLB Consultation: Analysis straight from Dickens: Helen Radall and Paul McDermott present a legal examination of the new PWLB borrowing rules as Charles Dickens might have imagined it. Free and easy PWLB (“Marley” to his friends)[...] dlvr.it/RnmwLq pic.twitter.com/yFxcPrQqEG

    Room151 1 month ago

    Room151’s top stories from a momentous year: 2020 was the year in which local government grappled with Covid-19, funding strains, controversy over borrowing rules and the threat of financial collapse. It has been an exhausting and historic[...] dlvr.it/RnlpZg pic.twitter.com/g3myNyox6J

    Room151 1 month ago

    Tracy Bingham: 2020, a year best forgotten but also one of learning: Many will rush to erase 2020 from their memories but, writes Tracy Bingham, there were also many lessons about finance teams, strategic planning and leadership. 2020: A year we’d… dlvr.it/RnlpY2 pic.twitter.com/m7G1krrtCu

    Room151 1 month ago

    Settlement must address ‘precarious’ local government finances: Dan Bates crosses his fingers for “no nasty surprises” in this week’s funding settlement but argues the “bigger prize” is post-Covid financial certainty. Thursday (17 December) should be the… dlvr.it/Rnj9dG pic.twitter.com/KLKjjuBqJE

    Room151 1 month ago

    PWLB consultation: Big change on the way but there are ‘grey areas’ and opportunities: The consultation on PWLB borrowing has concluded creating a new landscape for funding property acquisition. Our experts look at the implications. Tracie Langley The… dlvr.it/RndRvJ pic.twitter.com/KEqXEBmEfq

  • Categories

    • 151 News
    • Agent 151
    • Blogs
    • Chris Buss
    • Cllr John Clancy
    • Dan Bates
    • David Crum
    • David Green
    • Development
    • Forum
    • Funding
    • Graham Liddell
    • Ian O'Donnell
    • Interviews
    • Jackie Shute
    • James Bevan
    • Jobs
    • LGPSi
    • Mark Finnegan
    • Recent Posts
    • Resources
    • Richard Harbord
    • Stephen Fitzgerald
    • Stephen Sheen
    • Steve Bishop
    • Technical
    • Treasury
    • Uncategorized
  • Archives

    • 2021
    • 2020
    • 2019
    • 2018
    • 2017
    • 2016
    • 2015
    • 2014
    • 2013
    • 2012
    • 2011
  • Previous story £10bn needed for local government to manage Covid-19 crisis
  • Next story William Bourne: Will private equity remain attractive to LGPS?

© Copyright 2021 Room 151. Typegrid Theme by WPBandit.

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we'll assume that you are happy to receive all cookies from this website.OK